📝 Going Long AUD/NZD, Target 1.0820: Westpac Strategy

As a short term and tactical view, we bought the AUD/NZD at 1.0710, targeting 1.0820, with a stop at 1.0650, in the wake of the RBNZ's dovish hold. The RBNZ said it deemed developments since August as net balanced, compared to market assessments that they were positive and required a hawkish shift in language. The messaging was broadly the same as August's — a dovish outcome for markets. As we have seen with other central banks which have disappointed hawkish market expectations, the home currency usually weakens during the days and weeks following. We suspect that could be the case with the NZD. We are loathe to short the NZD against the USD, given the latter is technically stretched, whereas the AUD has underperformed lately. A major risk to the trade is China's economy deteriorates more than what is already priced in.

- Westpac Strategy